Processing In a Full Documentation World

About The Author

Bonnie Wilt-Hild - As an NAMP® staff writer, Bonnie currently serves as a senior instructor for FHA Online University (www.FHA-Classes.org) as well maintains a full-time mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans". If you're interested in becoming a writer for NAMP®, please email us at: blog@mortgageprocessor.org.

As FHA is pretty much the only game in town, most processors are beginning to realize that utilizing AUS findings for the purpose of documentation guidance is no longer helpful. Over the past several months FHA has made it very clear that Due Diligence in underwriting trumps documentation waivers on every level and it is for this reason that underwriters are asking for more and more documentation prior to making final underwriting decisions.

The past nine years have taught us a lot from an underwriting perspective but most importantly that we can not determine if a loan will perform long term based on a borrowers credit score and just because an AUS system tells you that it’s ok to approve a loan doesn’t mean that you should. It is for this reason that we have now embraced the old new method of documenting and underwriting loan files.

With this in mind, I thought now was a good time to discuss what underwriters are looking for from a documentation standpoint and hopefully this will get your loan through underwriting with very few if any conditions. Needless to say, if you have a clean approval you can get the case to closing much faster which always makes for happy borrowers, happy business partners and of course, a happy origination staff.

There are several things that processors now need to consider in addition to application documentation that can really impede getting a closed in a timely fashion and the first piece is now the compliance piece. Under the new RESPA rules processors now need to review the compliance piece of the file and make sure that all necessary disclosures and well documentation regarding changed circumstances and the like have been included in the underwriting package because as everyone grows into the new laws, underwriting is going to particularly careful with the piece.

Next of course is file documentation. From a processing standpoint I would go with standard file documentation as if you were documenting a file for a manual underwrite. One month worth of paystubs, 2 years W-2’s, bank statements covering the most recent two months, credit explanation, inquiry explanations and of course verification of rent regardless of what your findings tell you. Also, remember to document any other circumstances such as large deposits, multiple small deposits, deductions on paystubs, low year to date earnings and even collect the EMD regardless of if the borrower needs to it to close or not. If you provide all of this documentation to the underwriter there should be very little else needed unless the case is a really strange case and at that point you might wait for additional direction from underwriting anyway.

The key to processing a clean file is to continue to ask why. Also, can the borrower demonstrate that with the appropriate documentation. If this is done, a processor should be able to get the file to the table without having to revisit it several times. This will not only move your files through the pipeline but also allow a processor to handle a greater volume of loan applications. With that I will wish you all happy processing as well as happy underwriting.

SOURCE: Published by NAMP® Publishing Group, a division of the National Association of Mortgage Processors (NAMP) (http://www.mortgageprocessor.org)